Should you invest in gold, stocks or property? How 5 asset classes are likely to perform in 2018

Sanctum Wealth Management has launched its Investment Outlook report for 2018, which identifies various big-picture trends at play this year in the domestic and global economy, and its impact on investors’ portfolios.

With inflation rising, one could make the case that gold will remain an inflation hedge.

Given the rapid pace at which the Indian economy is developing, investors today are faced with the need to make crucial investment decisions amidst multiple cross currents, using a complex array of choices, says Sanctum Wealth Management. It has launched its Investment Outlook report for 2018, which identifies various big-picture trends at play this year in the domestic and global economy, and its impact on investors’ portfolios.

“Through our Investment Outlook Report for 2018, we have sought to make these decisions easier for investors by identifying key trends that are likely to impact investors’ portfolios this year,” says Shiv Gupta, Chief Executive Officer, Sanctum Wealth Management.

Apart from identifying key trends, it has also given its outlook for some asset classes. Here is Sanctum Wealth Management’s investment outlook for some asset classes for the calendar year 2018:

1. Equities: Prospective returns for equities are much higher than the 6-8% that one can expect from fixed income. Technical indicators remain positive and supportive. Should inflation or rates rise, one should not expect further gains. Should earnings continue to not come through, stocks would be vulnerable to a correction. The industry is not yet near the turn in the business cycle, but that could change during 2018 and it is likely that there will be greater volatility in equities in 2018 than 2017.

2. Fixed Income: Inflation has picked up somewhat alarmingly and the next move by the RBI most likely seems to be a rate hike. Yields have risen in recent weeks on fears of increased market borrowings and rising crude. FDI remains robust and rising. A stable currency has fuelled buying interest in debt with FIIs. Fiscal deficits of the states are a cause for concern, as is the consistently negative news coming out of PSUs on losses. Further complicating the issue will be the level of financing requirements put forward in the Union Budget. Rising rates, rising inflation and rising commodity prices create a fairly unpleasant environment for debt investors.

3. Gold: Sanctum has been underweight on gold all of 2016 and 2017. With inflation rising, one could make the case that gold will remain an inflation hedge. However, inflation may not spike meaningfully. Despite expectations of a spike in inflation by many watchers, Sanctum is mindful of technological disinflation, improving agri productivity, and better supply chain management.

4. Currencies: With rising rates in India and the US, the rupee remains an attractive currency. The RBI is expected to step in to stabilize the rupee above 65. With the growth in emerging markets outpacing US growth, the US dollar should remain stable to slightly weaker, in relation to emerging markets.

5. Real Estate: 2018 would witness the start of a slow and painful recovery process for the residential sector driven by end-user demand and depletion of unsold inventory. Sales in the secondary residential market, especially in the luxury segment, will continue to remain tepid. However, the transactions in mid-segment and affordable housing will remain strong.